Spain’s Best Year Since 2007

Spanish bulls are betting the economy will beat expectations again. The consensus at the start of 2017 was for the economy to lose steam this year as tailwinds faded and past reforms wore off. Now its renewed momentum—which has allowed the government to raise its forecast twice already—has some economists predicting the best year since the recovery started in 2014.

After growth of 3.2% last year, faster than its main eurozone peers, surveys and labor data point to continued strength in the economy. Banco Bilbao Vizcaya Argentaria SA and Bankia SA say it will top last year’s reading and grow 3.3% in 2017, Bloomberg reported.

If they’re proved correct, that would be the fastest growth since 2007, before the housing market crashed and Spain tipped into recession. The economy probably grew 0.9% in the second quarter, the fastest in almost two years, according to a survey before data due on Friday.

BBVA anticipates a 1% pace, citing household consumption, exports and a pickup in services helped by a tourism sector that’s on track for record visits. “The consensus view was for a slowdown but that hasn’t materialized—the economy remains very dynamic,” said Miguel Cardoso, chief Spain economist at BBVA in Madrid. “In fact, far from a correction, what we see is a more virtuous composition of growth.”

 “Favorable financing conditions and low interest rates have helped maintain the economic momentum in Spain,” said Jose Ramon Diez, chief economist at Bankia. “Having said that, policy works for all, and Spain is clearly outperforming its eurozone peers—that has to do with a structural change mainly through a more competitive external sector.”

The International Monetary Fund echoed that positive assessment this month when it upgraded its forecast to 3.1% from 2.6%, the second positive revision in seven months. The fund cited the impact of reforms, easier access to credit and a more balanced growth model that has a bigger focus on exports and is less reliant on construction.

“The economy carries a lot of momentum and that should place us on a stronger foot going into 2018 where we predict growth of 3%,” Diez said. “It’s a bullish call, but we don’t see a point to go below that with the kind of data that we’re getting.”